India Inc's philanthropy index soars in sync with Sensex

MUMBAI: As the Sensex continues to spiral towards dizzying heights, India Inc is getting richer by the day. This increase in wealth is being accompanied by companies dolling out wealth in the form of donations. An ET study of corporate donations reveals that philanthropy too is touching new highs in India.

An analysis of data (refer table) shows that while last year India Inc donated Rs 313 crore, it has risen by around 30% to Rs 411 crore this year. The largest donors include Reliance Industries, which donated Rs 26.65 crore, followed by Jaiprakash Industries and Infosys Technologies at Rs 26.31 crore and Rs 21 crore, respectively. Even though Reliance Industries is the top donor, the amount has gone down from around Rs 36 crore and Rs 38 crore in 2004 and 2005, respectively.

At the same time, donations from Infosys have been going up in the past four years. The net profit of Infosys for the year ended March 2007 was around Rs 3,800 crore while Reliance Industries’ posted a net profit of Rs 12,000 crore. This means, while donations are rising, they are still an extremely small fraction of the total profits of India Inc.

This does not surprise experts who track corporate donations. Says Bajaj Capital senior vice-president (research and financial planning group) Sanjeev Kumar Gopalakrishnan, “Donations as a percentage of turnover or profit are negligible in case of any company in India. But companies are generating economic wealth and are contributing to the exchequer by way of various taxes that are ploughed back to the society by way of social initiatives undertaken by the government.”

Another factor for such low levels of generosity could be the lack of agencies who have proven abilities to take up such activities. Probably as the number of NGOs increase and their works get highlighted, more money would flow towards charities.

In India, donations tend to be ad hoc rather than a fixed or pre-determined percentage of profits. There are some exceptions to the rule like Indian Oil which has a policy that 0.75% of the net profit of previous year should be spent towards activities related to delivering their corporate social responsibility.

The number of companies making donations of over Rs 1 crore has gone up to 72 from 61 last year. Though, it is only marginally up from 70 in 2005 when corporate donations stood at Rs 385 crore. About 554 companies gave donations of over Rs 1 lakh this year as compared with 543 last year.

The other top donors include Ambuja Cement, HPCL, Suzlon and Sobha Developers. Interestingly, PSUs like IOC, BPCL, Gail and NTPC that used to be among the large donors have been missing from the list in the past two years for want of any significant contributions. Similarly, despite being big donors abroad, MNCs are conspicuous by their absence in the top donors list.

There is, however, a possible explanation for the same and that is: the set expenditure guidelines from the headquarters that MNC subsidiaries have to follow. Some of the MNCs on whose balance sheets donations can be found include the likes of Bayer Crop Science, Cummins India and Siemens which have donated small amounts of not more than Rs 1 crore. One big company that no longer makes it on the list of big donors is ITC which donated close to Rs 7.7 crore in 2005.

What would make the coming months interesting when it comes to donations is the prospect of a general election. As the election buzz seems to be around the corner, Mr Gopalkrishnan adds that donations can increase substantially this time. “Section 80GGB provides any sum contributed to a political party by an Indian company is allowed as deduction while computing total income of the company. So donations may increase substantially in an election year.”